JD.com Shares Lower on Heavy Pressure

JD.com shares are lower after slowest revenue growth and amid CEO scandal.

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Chinese e-commerce firm JD.com  Inc’s shares came under heavy pressure after the company released its slowest quarterly revenue growth since its initial public offering in 2014.

JD.com, which has backing from Walmart Inc, Alphabet Inc’s Google, and China’s Tencent Holdings, has already shed nearly half its market value this year as it fights tight competition for Chinese online consumers.

On Monday, executives said slower sales in its core e-commerce business, especially big ticket items, damaged third-quarter earnings growth, adding that they expect an upturn in profits next year.

Revenue increased 25 percent from the same period a year earlier, but it missed analysts’ forecasts and was well below previous growth rates, which peaked at more than 60 percent in 2015.

The company also forecast fourth quarter sales growth between 18 to 23 percent, lower than average analyst estimate of 23.5 percent.

Chief financial officer Sidney Huang said that the “relatively soft” sales forecast was connected to an ongoing consumption slowdown in China.

JD.com shares were down more than 5 percent in pre-market trade on Nasdaq.

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Worries over the US-China trade war and a legal allegation facing chief executive Richard Liu have dragged down JD.com shares by more than 44 percent this year. Shares of its bigger rival Alibaba Group Holding have lost 11 percent.

Both companies are making efforts to reach new consumers in Southeast Asia and rural China as demand fizzles out in big cities. Earlier this month, Alibaba lowered its forecast for full-year sales, citing economic uncertainty linked to the trade war.

JD.com’s technology and content costs for the third quarter were 3.4 billion yuan, almost double the one from a year earlier, reflecting a high investment in research development, including warehouse technology, offline retail, and drones.

In August, the company said it will move its warehouse business into a separate unit, offering logistics management to third party brands as well as its own platform, in a bid to boost income.

JD.com said revenue totaled 104.8 billion yuan, or $15.09 billion, for the quarter than ended September 30, failing to meet an average estimate of 106.2 billion yuan from 22 analysts, according to IBES data from Refinitiv.

JD.com’s volumes are seasonally lower in the third quarter as it ramps up to its November Singles’ Day promotion period. This year, it managed to sell 158.9 billion yuan in goods during the month-long event, higher 17 percent from a year earlier.

 In spite of the lower than expected sales, the company reported income of 0.80 yuan per share, above an estimate of 0.72 yuan, fueled by stronger sales in its tech services unit, which grew at almost twice the rate of its general product sales.

JD.com has recently been on the news for the arrest of Richard Liu over an allegation of sexual misconduct in the United States.

He was released after a night spent in jail and JD.com has said that the accusation against Liu was unsubstantiated.

Executives shrugged off a question about the arrest during a call with analysts, declining to comment on the ongoing legal process and asking attendees to not ask any further questions on the subject.

Meanwhile, Liu said that he would be focusing on new business lines and strategy in the coming year, handing off management of more mature units to others in the company.

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